Guidelines
ADI Authorisation Guidelines
April 2008
www.apra.gov.au
Australian Prudential Regulation Authority
Disclaimer and copyright
These guidelines are not legal advice and users are
encouraged to obtain professional advice about the
application of any legislation or prudential standard
relevant to their particular circumstances and to
exercise their own skill and care in relation to any
material contained in these guidelines.
APRA disclaims any liability for any loss or damage
arising out of any use of these guidelines.
These guidelines are copyright. You may use and
reproduce this material in an unaltered form only
for your personal, non-commercial use or noncommercial use within your organisation. Apart from
any use permitted under the Copyright Act 1968, all
other rights are reserved. Requests for other types of
use should be directed to APRA.
Australian Prudential Regulation Authority
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Contents
Objective of the Guidelines and Outline of the Authorisation Process
4
Guidelines on Authorisation of ADIs
5
Overview
5
Use of restricted words and expressions
5
Trading names
6
Authorisation criteria for ADIs
6
Capital
6
Ownership
7
Governance
7
Risk management and internal control systems
7
Compliance
8
Information and accounting systems
8
External and internal audit arrangements
8
Supervision by home supervisor
9
Foreign ADIs
9
Restrictions on deposit-taking activities
9
Disclosure to depositors of non-application of depositor protection provisions
9
Dual operation of foreign banks
10
Application procedures
11
Preliminary consultation
11
Information required to be submitted on application
11
Submission of application
11
Processing and notification
11
Attachment A – Supporting information required for an application
to conduct banking business
13
Locally incorporated ADI
13
Attachment B – Supporting information required for an application
to conduct banking business
16
Foreign ADI
16
Australian Prudential Regulation Authority
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Objective of the Guidelines and
Outline of the Authorisation
Process
These Guidelines set out the Australian Prudential
Regulation Authority's (APRA's) authorisation process
for authorised deposit-taking institutions. The
guidelines apply to prospective applicants seeking an
authority to carry on banking business in Australia
under the Banking Act 1959 (the Act). They outline
the minimum criteria to be addressed by applicants
and the necessary information and documents to be
submitted with an application.
APRA’s authorisation process, as with its approach
to supervision, is consultative and each applicant is
assigned a responsible supervisor who is the main
contact for the entity on all APRA-related matters.
Generally, the overall licensing process could take from
three to 12 months. Some common factors that can
delay the authorisation process include:
•
an initial submission that contains incomplete or
inadequate documentation;
•
an entity being unable or unwilling to comply
with APRA’s requirements (for example, being
unable to raise the required level of capital); and
•
delays in responding to APRA’s requirements and
requests.
APRA encourages all prospective applicants to
contact it as early as possible during their planning
process to discuss their intent (or likely intent) to
apply for an authorisation.
Where an applicant does not have an existing
operation in Australia, it is expected to build its
resources and establish its core operations during the
authorisation process, so that it is ready to commence
business when it is granted authorisation.
The application process involves the following steps:
•
preliminary consultation between APRA and the
prospective applicant to discuss the applicant’s
plans to carry on banking business in Australia.
This discussion will assist in identifying any
matters which might adversely impact on the
proposal and in agreeing the format and content
required in an application;
•
submission of a draft application and relevant
information, as detailed in the authorisation
guidelines; and
•
APRA’s review of the application. This will
include meetings with senior officers and other
responsible persons, as well as on-site prudential
reviews.
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Guidelines on Authorisation of
ADIs
5.
APRA may refuse an application for authority
to carry on banking business in Australia where
an applicant is a subsidiary of a non-operating
holding company (NOHC) that does not hold a
NOHC authority under the Act. Where relevant,
an applicant should submit to APRA a written
application by its NOHC for a NOHC authority
under Section 11AA of the Act concurrently
with its application for authority to carry on
banking business.
6.
Foreign banks may apply to establish locally
incorporated subsidiaries or branches to carry
on banking business in Australia (foreign banks
authorised by APRA to carry on banking business
in Australia through branches are referred to
as ’foreign ADIs’ under the Act). There are no
restrictions on the number or size of operations
of foreign banks in the Australian market.
A foreign bank may simultaneously hold an
authority to operate as a foreign ADI and be
the parent of a locally incorporated subsidiary
authorised as an ADI.
7.
Except as explicitly stated in APRA’s Prudential
Standards and Division 1B of Part II of the
Act, foreign bank-owned subsidiary ADIs are
subject to the same legislative and prudential
requirements as locally owned ADIs. Although
the prime responsibility for oversight of the
Australian operations of a foreign ADI rests with
local management and its head office as well as
with the foreign ADI’s home supervisor(s), the
foreign ADI is nonetheless required to submit its
local operations to APRA’s prudential supervision.
Overview
1.
2.
These Guidelines are for prospective applicants
seeking an authority to carry on banking business
in Australia. They set down the minimum criteria
to be addressed by applicants and necessary
information and documents to be submitted
with an application.
’Banking business’ consists of both taking deposits
(other than as part-payment for identified goods
or services) and making advances of money,
as well as other financial activities prescribed
by regulations under the Act. Banking business
must not be undertaken in Australia without
authorisation from APRA. Institutions granted an
authority to carry on banking business in Australia
are referred to as ’authorised deposit-taking
institutions’ or ’ADIs’. Applicants need not offer
a full range of banking services on authorisation.
They may choose to provide specialised services
provided they can demonstrate expertise in their
selected area of operation.
3.
The Act only allows corporations to carry on
banking business in Australia. APRA cannot,
therefore, consider applications from partnerships
or unincorporated entities. Prospective applicants
may refer to the Australian Securities and
Investments Commission (ASIC) website (www.
asic.gov.au) for information with regard to the
requirements and procedures for registration of a
body corporate in Australia.
4.
A body corporate seeking an authority to carry
on banking business in Australia should apply in
writing to APRA in accordance with section 9 of
the Act. An application should be signed by two
Directors of the applicant.
Australian Prudential Regulation Authority
Use of restricted words and expressions
8.
The granting of an authority to carry on banking
business gives the successful applicant the right
to use the expression 'authorised deposit-taking
institution’ or ’ADI’ in relation to its business.
The authority does not automatically entitle the
ADI to call itself a ’bank’. Applicants should note
section 66 of the Act which restricts the use of
certain words or expressions without explicit
APRA consent (refer to section 66 Guidelines
available on the APRA website: www.apra.gov.au).
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9.
An applicant wishing to use any of the restricted
words or expressions on authorisation should
apply concurrently to APRA for a section 66
consent.
Trading names
10. An ADI that wishes to use a trading name, other
than its registered company name, may seek
to use a restricted expression in that trading
name. APRA will not ordinarily object to this
where the ADI would otherwise be permitted to
use that expression (e.g. where an ADI that is a
bank wishes to use the term ’bank’ in its trading
name). If the restricted expression to be used in
the trading name is not one that the ADI would
ordinarily be permitted to use (e.g. where the
ADI is a bank and wishes to use the term ‘credit
union’ in the trading name), APRA will need to
consider on a case-by-case basis whether such
use could be misleading.
11.
In all cases, APRA would expect the ADI using
the trading name to clearly disclose on general
marketing information (such as Internet
sites), as well as account agreements and
other contractual documentation provided to
customers, that the trading entity is a trading
name, division or other operating arrangement
of the licensed ADI, as appropriate. APRA would
expect such disclosure irrespective of whether
the trading name includes a restricted expression
to ensure all customers know they are dealing
with the licensed ADI.
Authorisation criteria for ADIs
12. APRA will only authorise suitable applicants
with the capacity and commitment to conduct
banking business with integrity, prudence and
competence on a continuing basis.
Australian Prudential Regulation Authority
13. Unless otherwise indicated, the authorisation
criteria set out below are applicable to all
applicants, including mutually owned applicants
as well as foreign bank applicants intending
to establish branches or locally incorporated
subsidiaries. These criteria represent the minimum
requirements that an applicant will need to meet
for authorisation under the Act and should not
be taken as an exhaustive list. Depending on the
circumstances, APRA may refuse an application
on other prudential grounds not covered in
these Guidelines.
14. APRA expects all applicants to be able to
comply with its prudential requirements, as set
out in various prudential standards, from the
commencement of their banking operations.
Prospective applicants should familiarise
themselves with these prudential standards.
It should be noted that more stringent or
otherwise modified prudential requirements may
be set on a case-by-case basis, for example, for
newly authorised ADIs in their formative years or
those specialising in particular business lines.
Capital
15. APRA will assess the adequacy of start-up capital
for an applicant on a case-by-case basis based
on the scale, nature and complexity of the
operations as proposed in the business plan.
Applicants proposing to operate as banks must
have a minimum of $50 million in Tier 1 capital.
Otherwise, no set amount of capital is required
for an authority to carry on banking business.
Foreign ADIs are not required to maintain
endowed capital in Australia.
16. Applicants must satisfy APRA that they are
able to comply with APRA’s capital adequacy
requirements from the commencement of their
banking operations. All locally incorporated ADIs
are required to maintain, at all times, a prudential
capital ratio (PCR) as set by APRA in accordance
with Prudential Standard APS 110 Capital Adequacy.
An ADI’s PCR is 8 per cent of total risk-weighted
assets, of which at least half must be made up
of Tier 1 capital (i.e. a minimum Tier 1 capital
ratio of 4 per cent). An ADI will, at all times, be
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required to maintain a risk-based capital ratio in
excess of its PCR. Newly established ADIs may be
subject to a higher minimum capital ratio in their
formative years, depending on the risk profile
of the proposed operations. Mutually owned
ADIs are permitted to have start‑up capital
made up entirely or mostly of Tier 2 capital. The
timeframe for these institutions to build up Tier
1 capital will be agreed with APRA on a case-bycase basis. Foreign bank applicants are expected
to meet comparable capital adequacy standards,
which must be consistent in all substantial
respects with the Basel II Capital Framework, as
required by their home country supervisors.
Ownership
17.
Ownership of ADIs is governed by the Financial
Sector (Shareholdings) Act 1998 (the FSSA) which
limits shareholdings of an individual shareholder
or group of associated shareholders in an ADI
to 15 per cent of the ADI’s voting shares. A
higher percentage limit may be approved by the
Treasurer on national interest grounds.
18. Applicants must satisfy the requirements
specified in the FSSA in respect of ownership
interests in ADIs or, where relevant, have
exemptions granted under the FSSA. NOHCs
with a 100 per cent shareholding in the proposed
ADI and foreign bank parents must also have a
wide spread of ownership unless exempted from
the provisions of the FSSA.
19. All substantial shareholders of an applicant are
required to demonstrate to APRA that they
are ’fit and proper’ in the sense of being wellestablished and financially sound entities of
standing and substance. In the case of foreign
bank applicants, this requirement applies both
to the foreign bank itself and to the substantial
shareholders of the foreign bank. APRA requires
all substantial shareholders to be able to
demonstrate that their involvement in the ADI
represents a long-term commitment and that
they have the capacity to contribute additional
capital, if required.
Australian Prudential Regulation Authority
Governance
20. Applicants must satisfy the requirements set out
in Prudential Standard APS 510 Governance with
regard to the composition and functioning of
the Board. Applicants must also satisfy APRA
that they have policies in place to ensure that
persons who hold the key positions within the
proposed ADI are fit and proper, in accordance
with Prudential Standard APS 520 Fit and Proper.
21.
APRA may consult other regulators (domestic and
overseas) regarding the suitability of personnel
for the proposed ADI. Where necessary,
applicants will be expected to provide APRA with
authorisation to seek details in this regard.
Risk management and internal control
systems
22. Applicants must satisfy APRA that their
proposed (or existing) risk management
and internal control systems are adequate
and appropriate for monitoring and limiting
risk exposures in relation to domestic and,
where relevant, offshore operations from
the commencement of the ADI’s banking
operations. This includes, in particular, the
development, implementation and maintenance
of adequate and appropriate policies and
procedures for monitoring and managing:
a)
credit risk, including policy on lending to
shareholders, directors and associates;
exposures to individual clients and groups
of related clients; policy on large exposures;
policy on monitoring asset quality (e.g. loan
grading system, recognition of impaired
facilities and provisioning policy) (refer
to Prudential Standards APS 112 Capital
Adequacy: Standardised Approach to Credit
Risk, APS 220 Credit Quality, APS 221 Large
Exposures and APS 222 Associations with
Related Entities);
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b)
market risk arising from banking business
and trading activities (refer to Prudential
Standard APS 116 Capital Adequacy: Market
Risk);
c)
liquidity risk (refer to Prudential Standard APS
210 Liquidity); and
d)
operational risk (refer to Prudential Standard
APS 114 Capital Adequacy: Standardised
Approach to Operational Risk; for outsourcing
and business continuity management in
particular, refer to Prudential Standards
APS 231 Outsourcing and APS 232 Business
Continuity Management).
23. Foreign bank applicants must demonstrate that
the arrangements for reporting to the parent
foreign bank or head office are adequate.
24. In assessing whether the policies and procedures
proposed for managing and controlling risk are
adequate and appropriate for the applicant’s
operations, APRA will take account of the size,
nature and complexity of the operations, the
volume of transactions undertaken, the proposed
organisational structure, and the geographical
distribution of the business as set out in the
business plan.
Compliance
25. Applicants must satisfy APRA that their
compliance processes and systems are adequate
and appropriate for ensuring compliance with:
a)
APRA’s prudential standards; and
b)
other Australian regulatory and legal
requirements.
26. In assessing whether the compliance processes
and systems are adequate and appropriate for
the applicant’s operations, APRA will have regard
to the size, nature and complexity of those
operations.
Australian Prudential Regulation Authority
Information and accounting systems
27. All ADIs are required to submit data to APRA
in terms of the reporting standards under the
Financial Sector (Collection of Data) Act 1998.
Required reporting forms for ADIs depend on
the type of ADI and are available on APRA’s
website.
28. Applicants must satisfy APRA that their
information and accounting systems are
adequate for maintaining up-to-date records of
all transactions and commitments undertaken by
an ADI, so as to keep management continuously
and accurately informed of the ADI’s condition
and the risks to which it is exposed. Specifically,
applicants are required to demonstrate to APRA
that their systems will be capable of producing
all required statutory and prudential information
in an accurate and timely manner from the
commencement of their banking operations.
29. In assessing the overall adequacy of the
information and accounting systems, APRA
will have regard to the integrity and security
of the systems and arrangements for business
continuity management (refer to Prudential
Standard APS 232 Business Continuity Management).
Outsourcing of material data processing must
satisfy APRA’s outsourcing requirements set out
in Prudential Standard APS 231 Outsourcing.
External and internal audit arrangements
30. Applicants must demonstrate to APRA that
arrangements have been established with
external auditors in accordance with the
requirements set out in Prudential Standard
APS 310 Audit & Related Arrangements for
Prudential Reporting. This includes, in particular,
arrangements for an external auditor to report to
APRA on:
a)
the observance of APRA’s prudential
standards and requirements;
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b)
31.
compliance with statutory requirements, as
well as any conditions on the ADI authority
(including disclosure requirements for
foreign ADIs in respect of deposit-taking
activities pursuant to section 11E of the
Act);
c)
the reliability of information supplied to
APRA for prudential supervision purposes;
d)
whether the external auditor has become
aware of any matters which, in the
auditor’s opinion, may have the potential
to prejudice materially the interests of
depositors of the ADI; and
e)
any other matters agreed between the ADI,
the external auditor and APRA under the
tripartite arrangements.
Applicants are required to satisfy APRA on the
adequacy of internal audit arrangements and
requirements set out in Prudential Standard APS
510 Governance.
Supervision by home supervisor
32. Foreign bank applicants must have received
consent from their home supervisor for
the establishment of a banking operation in
Australia. Only applicants that are authorised
banks in their home country will be granted
authorities to operate foreign ADIs.
33. Foreign bank applicants must satisfy APRA
that they are subject to adequate prudential
supervision in their home country. In considering
the standard of supervision exercised by the home
supervisor, APRA will have regard to the Core
Principles of Banking Supervision promulgated by
the Basel Committee on Banking Supervision. This
includes whether the home supervisor supervises
the foreign bank applicant on a consolidated basis
in accordance with the principles contained in the
Basel Concordat, and is prepared to co-operate
(in terms of the Concordat) with APRA in the
supervision of the ADI in Australia.
Australian Prudential Regulation Authority
Foreign ADIs
Restrictions on deposit-taking activities
34. APRA grants authorities to carry on banking
business in Australia to foreign ADIs subject to a
condition specifically restricting the acceptance
of retail deposits by their Australian branches.
Foreign ADIs are not required to maintain
endowed capital in Australia and are not subject
to any capital-based large exposure limits.
Moreover, depositors with foreign ADIs do not
have the same protections under the Act as
depositors with locally incorporated ADIs.
35. APRA’s policy, as set out in the terms of
authorisation for each foreign ADI, is that foreign
ADIs are not permitted to accept initial deposits
(and other funds) from individuals and noncorporate institutions of less than $250,000.
They can, however, accept deposits and other
funds in any amount from incorporated entities,
non-residents and their employees. No other
specific restrictions are placed on the sources of
funding or on the use of funds by foreign ADIs.
They may offer cheque accounts to customers,
subject to the above requirements governing
the nature and size of deposits they can accept.
Where credit card accounts are offered, there
should be policies and procedures in place to
ensure that any credit balances are promptly
identified and repaid.
Disclosure to depositors of non-application
of depositor protection provisions
36. Foreign ADIs are not subject to the ‘depositor
protection’ provisions of the Act, which are
contained in Division 2 of Part II. To ensure
depositors with foreign ADIs understand this
limitation when they deal with foreign ADIs,
section 11E of the Act requires a foreign ADI
to disclose to prospective depositors the
requirements in Division 2 of Part II that do not
apply to it and to obtain APRA’s prior approval
for the manner in which it makes such disclosure.
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37. While compliance with section 11E of the Act
is not strictly a criterion for authorisation, it will
generally be administratively convenient for
foreign ADI applicants to apply for approval of
the manner of disclosure at the time of making
the application for authorisation.
38. An application for approval of the manner of
disclosure will need to satisfy the APRA delegate
that:
a)
a written disclosure statement will be
provided to each prospective depositor
prior to the opening of an initial account,
the transfer of an account from an existing
entity, or the lodgement of an initial deposit;
b)
the statement will be clearly written in
plain language, concise and prominently
displayed;
c)
the statement will describe, in summary
form, the key elements of Division 2 of Part
II of the Act that do not apply to foreign
ADIs, namely:
(i)
APRA’s power to take control or
appoint an administrator to take
control of an ADI in the interests of
depositors in the event of insolvency or
suspension of payments;
(ii) the requirement for an ADI to
immediately inform APRA if it
considers it is likely to become unable
to meet its obligations or is about to
suspend payment;
40. In this regard, a foreign ADI may wish to consider
obtaining an acknowledgement, signed by each
prospective depositor (including all parties
interested in a joint account) that the foreign
ADI provided the prospective depositors with
the written disclosure statement prior to opening
the initial account or accepting the initial deposit
of funds.
41.
External auditors of foreign ADIs will be asked
to report to APRA on compliance with the
disclosure requirements as part of the audit
arrangements in relation to the observance of
prudential standards (refer to Prudential Standard
APS 310 Audit and Related Arrangements for
Prudential Reporting with respect to the required
timing and frequency of such reporting).
Dual operation of foreign banks
42. Where a foreign bank simultaneously holds an
authority to operate as a foreign ADI and is
the parent of a locally incorporated subsidiary
authorised as an ADI, each operation is required
to conduct its business in Australia in a way which
recognises, and makes clear to others, its separate
legal status and authorisation.
43. The foreign ADI’s branch and the subsidiary ADI
will need to have:
a)
separate books of accounts;
b)
separate statistical (including prudential)
reporting to APRA;
c)
separate internal control systems for
monitoring and managing risks (including
systems for controlling credit risk, liquidity
risk, market risk and operational risk);
d)
as part of the control systems, separate
systems of delegations (although these could
comprise the same people in some cases);
e)
separate chief executive officers responsible
for the proper management and prudent
operation of the foreign ADI and the
subsidiary ADI, respectively; and
(iii) the requirement for an ADI to hold
assets in Australia exceeding its deposit
liabilities in Australia; and
(iv) depositor priority over the assets of
an ADI in Australia in the event of
insolvency or suspension of payments.
39. To assist in substantiating compliance with
section 11E of the Act, the foreign ADI should
consider putting in place systems and procedures
to ensure depositors opening an initial account
or making an initial lodgement of funds are
provided with the written disclosure statement.
Australian Prudential Regulation Authority
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f)
processes to ensure customers understand
which entity they are dealing with and the
implications for their interests when staff
are undertaking dual roles for both the
branch and the locally operated subsidiary.
44. Banking transactions between the foreign ADI
and the subsidiary ADI should be at arm’s length
(on commercial terms and conditions).
45. The foreign ADI and the subsidiary ADI are
permitted to share the same premises. In
addition, joint functional support services such
as personnel and financial control between the
two authorised entities are permitted, as are joint
treasury operations. Refer to Prudential Standard
APS 231 Outsourcing for requirements relating to
outsourcing to a related body corporate.
Application procedures
Preliminary consultation
46. Prospective applicants for an authority to carry
on banking business in Australia are encouraged
to contact APRA at an early stage to discuss their
plans prior to submitting a formal application.
This assists APRA in identifying any matters which
might adversely affect the application and to
advise on the format and content required of an
application. APRA will review and comment on
well developed drafts of an application through
various stages of its development. Submission of
drafts in electronic format is encouraged.
47. Applicants must contact the Reserve Bank
of Australia (RBA) separately regarding
requirements for establishing an Exchange
Settlement Account (ESA). Applicants
establishing ESAs are responsible for keeping the
RBA apprised of the status of their application.
APRA may also communicate directly with the
RBA regarding the application.
Australian Prudential Regulation Authority
48. APRA is funded by levies payable by
authorised institutions and charges fees for
certain functions, including applications for
ADI authorisation. Further information on
levies and fees is available on APRA’s web
site. The application fee must be paid at the
commencement of the application process.
Information required to be
submitted on application
49. A list of information and supporting documents
required to be submitted by an applicant for
an authority to carry on banking business
in Australia, either to operate as a locally
incorporated ADI or a foreign ADI, is set out in
Attachments A and B.
50. APRA may seek such additional information
from an applicant as is necessary to assess the
application.
Submission of application
51.
Two copies of the final application, each to
be signed by two Directors of the applicant,
including all the required information
and supporting documents as set out in
the Attachments to these Guidelines (as
appropriate), should be submitted to APRA. If
there are any material changes to the information
provided before a decision on the application has
been made, the applicant should notify APRA in
writing as soon as possible.
Processing and notification
52. All applications will be processed within a
reasonable time, having regard to the particular
circumstances of each application, including the
completeness of information and documents
submitted to APRA by the applicant.
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53. Approval of the application may be contingent
on other relevant approvals being granted. For
example, this may include approvals under the
Financial Sector (Shareholdings) Act 1998, the
Foreign Investment and Takeovers Act 1975, and for
an Australian Financial Services Licence under the
Corporations Act 2001.
54. An authority may be granted to take effect on
delivery or from some nominated date. APRA
may impose conditions upon an authority at the
time it is granted and may impose, vary or revoke
conditions on an authority thereafter.
55. Applicants will be notified of APRA’s decision
on the application in writing. Authorisations
are published on APRA’s website and in the
Government Gazette.
Australian Prudential Regulation Authority
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Attachment A
Supporting information required
for an application to conduct
banking business
Locally incorporated ADI
1. Ownership, board and management
2. Three-year business plan
The business plan submitted should incorporate the
goals of the first three years of operations of the ADI
and the ADI group including all controlled entities.
The plan should include:
Structure of business
a)
an outline of the proposed activities and scale of
operations, including details of any specialised
services proposed and relevant expertise, as well
as any material outsourcing arrangements;
a)
Name of the applicant and proposed ADI and
the date and place of incorporation.
b)
The address of the registered office and
operational offices.
b)
c)
A brief history of the applicant and an outline of
existing operations.
details of borrowing and lending activities to be
undertaken;
c)
details of proposed off-balance sheet activities;
d)
Names of substantial shareholders (direct and
ultimate) and their respective shareholdings and
details of any related entities in Australia.
d)
location of head office and an outline of the
branch network envisaged and the timeframe
over which the network will be established;
e)
Board and committee structure, including names
of directors, their principal business associations,
curriculum vitae, and statements regarding their
fitness and propriety (refer to Prudential Standards
APS 510 Governance and APS 520 Fit and Proper).
e)
other intended means of product distribution;
f)
an estimate of total staff complement envisaged;
g)
the proposed date for commencement of
operations; and
An outline of the proposed organisational
framework, including the names, responsibilities
and curriculum vitae of senior management, and
statements regarding their fitness and propriety.
Financial projections
f)
g)
h)
A written undertaking by substantial shareholders
(including foreign bank parents) to provide
additional capital, if required, and that their
investment in the ADI represents a long-term
commitment.
Proposed initial capital (authorised, paid-up,
classes of shares, etc) and capital ratios (refer to
Prudential Standards APS 110 Capital Adequacy
and APS 111 Capital Adequacy: Measurement of
Capital).
Australian Prudential Regulation Authority
a)
Projections (including sensitivity analysis covering
expected, up-side and down-side scenarios) of
the following:
i)
detailed balance sheet, cashflow and
earnings (including assumptions) for the
proposed ADI;
ii)
key financial and prudential ratios (e.g.
capital ratios, liquidity ratios, etc) for the
proposed ADI; and
iii)
key financial and prudential ratios for the
proposed ADI and its subsidiaries on a
consolidated basis.
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3. Systems and controls
4. Subsidiaries
a)
a)
Details of existing or proposed subsidiaries and
associates, the nature and scale of their business,
and their proposed business relationship with the
proposed ADI.
b)
Any plans to transfer assets from subsidiaries and
associates to the proposed ADI.
Details of the risk management systems and
procedures to be used to control and monitor
risks in relation to both domestic and offshore
operations of the ADI and its subsidiaries,
including:
(i)
credit policies, including policy on loans
to shareholders, directors and associated
interests, on exposures to individual clients
and groups of related clients, and covering
both banking and financial market (trading)
activities;
5. Other
a)
Certificate of incorporation of the corporate
vehicle to hold the ADI authority (refer to
section 10 of the Act).
(ii) policy on monitoring asset quality, loan
grading, recognition of impaired facilities
and provisioning for impaired facilities and
the establishment of a General Reserve for
Credit Losses;
b)
Certified copies of Memorandum and Articles of
Association (refer to section 10 of the Act).
c)
External auditor’s certificates verifying the level
of capital and capital ratios of the applicant.
(iii) liquidity management, including funding
and maturity mismatch policies;
6. Foreign bank applicants
(iv) procedures for controlling market risk, in
both financial market (trading) activities
(including derivatives) and banking book;
a)
The foreign bank parent of an applicant should
provide:
i)
a brief history and an outline of its
operations, substantial shareholders (direct
and ultimate) and directors (including
principal business associations);
ii)
balance sheet, profit and loss and offbalance sheet data for the last three years
(plus any available current year data),
including information on impaired loans
and capital ratios;
iii)
an outline of the reporting lines proposed
from the subsidiary ADI to its foreign bank
parent;
iv)
an undertaking to co-operate in the
supervision of the proposed subsidiary
ADI, including the provision of information
required by APRA to supervise the
proposed subsidiary ADI;
(v) control of operational risk; and
(vi) arrangements for reporting to a local or
foreign bank parent (where applicable).
b)
Details of information and accounting systems
(including any outsourcing of data processing
and other back office functions).
c)
Business continuity (including disaster recovery)
plan.
e)
Internal audit arrangements.
f)
Evidence that, from the commencement of
operations, information and other systems will
be capable of producing all required statutory
and prudential returns in an accurate and timely
manner.
Australian Prudential Regulation Authority
14
b)
v)
an undertaking to keep APRA informed
of any significant developments adversely
affecting its financial soundness and/or
reputation globally, and to provide promptly
to APRA copies of its published financial
accounts and any significant media releases
(with translations where appropriate); and
vi)
an outline of the supervisory arrangements
to which it is subject to in its home country.
A statement from the foreign bank parent’s
home supervisor that:
i)
the foreign bank is of good financial
standing and has the supervisor’s consent
to apply for an authority to operate as a
locally incorporated ADI in Australia;
ii)
it supervises the parent bank and its
subsidiaries on a consolidated basis in
accordance with the principles contained in
the Basel Concordat; and
iii)
it is willing to co-operate in the supervision
of the proposed subsidiary in terms of the
Concordat.
7. Prudential supervision by APRA
a)
A written undertaking by the applicant to:
i)
adhere to APRA’s prudential requirements
at all times;
ii)
consult APRA and be guided by it on
prudential matters, including in respect of
new business initiatives; and
iii)
provide APRA with any information that it
may require for the prudential supervision
of the proposed ADI (and its consolidated
group).
b)
For a foreign bank-owned applicant, an
acknowledgement by the applicant that APRA
may discuss the applicant’s conduct and status
with its parent and its parent’s supervisor(s).
c)
Evidence that arrangements have been
established for the prospective ADI’s external
auditors to report to APRA.
Australian Prudential Regulation Authority
15
Attachment B
Supporting information required
for an application to conduct
banking business
b)
any plans to establish (or maintain) a locally
incorporated subsidiary ADI in Australia and
the strategy under which these entities would
operate, including details of any proposals to
transfer assets or to share support services;
Foreign ADI
c)
details of borrowing and lending activities to be
undertaken;
1. Ownership and management
d)
details of proposed off-balance sheet activities;
a)
Name of the foreign bank applicant.
e)
b)
A brief history of the foreign bank and an
outline of its operations, names of substantial
shareholders (direct and ultimate) and their
respective shareholdings, directors (including
principal business associations) and senior
management.
location of principal Australian office and an
outline of Australian representation envisaged
and the timeframe over which representation will
be established;
f)
an estimate of total staff complement envisaged;
g)
the proposed date for commencement of
operations; and
c)
d)
e)
Information necessary to demonstrate the
applicant’s financial standing. This should
include balance sheet, profit and loss and offbalance sheet data for the foreign bank itself,
and where applicable for its holding company,
for the last three years (plus any available
current year data) and information on impaired
loans and capital ratios.
An outline of the proposed branch framework,
including names of the senior management of
the Australian branch, their responsibilities and
curriculum vitae.
An outline of the proposed reporting lines from
the local branch to head office.
2. Three-year business plan
Financial projections
h)
projections (including sensitivity analysis covering
expected up-side and down-side scenarios) of
the following:
i)
detailed balance sheet, cashflow and
earnings (including assumptions); and
ii)
key financial and prudential ratios (as
relevant).
3. Systems and controls
a)
Details of the risk management systems and
procedures to be adopted to control and
monitor risks, including:
i)
credit policies, including policy on loans
to shareholders, directors and associated
interests, on exposures to individual clients
and groups of related clients, and covering
both banking and financial market (trading)
activities;
ii)
policy on monitoring asset quality, loan
grading and provisioning for impaired
facilities;
iii)
liquidity management, including funding
and maturity mismatch policies;
The business plan submitted should incorporate the
goals or milestones of the proposed branch’s first
three years of operations and include:
Structure of business
a)
an outline of the proposed activities (covering the
parent’s other operations in Australia) and scale
of operations, including details of any specialised
services proposed and relevant expertise;
Australian Prudential Regulation Authority
16
b)
iv)
procedures for controlling market risk, in
both financial market (trading) activities
(including derivatives) and banking book;
v)
control of operational risk; and
vi)
arrangements for reporting to head office.
d)
Details of information and accounting systems
(including any outsourcing of data processing
and other back office functions).
c)
Internal audit arrangements.
d)
Business continuity (including disaster recovery)
plan.
e)
Evidence that, from the commencement of
operations, information and other systems will
be capable of producing all required statutory
and prudential returns in an accurate and timely
manner.
e)
4. Associates
a)
b)
c)
Details of existing or proposed subsidiaries and
associates of the proposed branch in Australia;
the nature and scale of their business; and their
proposed business relationship with the branch.
Plans to transfer business from any subsidiaries
and associates in Australia into the proposed
branch.
a)
An undertaking by the applicant to keep APRA
apprised of developments in its subsidiaries in
Australia.
b)
c)
A copy of the certificate of incorporation of the
foreign bank applicant (refer to section 10 of the
Act) and its authorisation to conduct banking
business in its home country.
i)
consenting to the application to establish a
branch in Australia;
ii)
confirming that the applicant is of good
financial standing;
iii)
confirming that the applicant is supervised
on a consolidated basis in accordance
with the principles contained in the Basel
Concordat; and
iv)
agreeing to co-operate in the supervision of
the proposed branch, in terms of the Basel
Concordat.
An undertaking by the applicant to keep APRA
informed of any significant developments
adversely affecting its financial soundness and/
or reputation globally, and to provide promptly
to APRA copies of its published financial
accounts and any significant media releases (with
translations where appropriate).
6. Prudential supervision by APRA
5. Other
a)
A statement from the applicant’s home
supervisor:
A written undertaking by the applicant that the
proposed branch will:
i)
adhere to APRA’s prudential requirements
at all times;
ii)
consult APRA and be guided by it on
prudential matters, including in respect of
new business initiatives; and
iii)
provide APRA with any information which it
may require for the prudential supervision
of the branch.
b)
Certified copies of Memorandum and Articles of
Association (refer to section 10 of the Act).
An acknowledgement by the applicant that
APRA may discuss the conduct of the branch
with its head office and its home supervisor(s).
c)
An outline of the supervisory arrangements to
which the foreign bank is subject to in its home
country.
An acknowledgement by the applicant that the
proposed branch will conform with the disclosure
requirements pursuant to section 11E of the Act.
d)
Evidence that arrangements have been
established for the prospective branch’s external
auditors to report to APRA as required.
Australian Prudential Regulation Authority
17
Telephone
1300 55 88 49
Website
www.apra.gov.au
Mail
GPO Box 9836
in all capital cities
(except Hobart and Darwin)
ADI_GL_042008_ex
Email
info@apra.gov.au